Review Of American Hard Assets -- June/July 2014 Edition

American Hard Assets ("AHA") is out with their June/July issue, they call this "The American Issue" in that they have several articles analyzing hard assets mostly pertaining to Americans.  Before I get to the magazine itself, I wanted to stroll around their website:

ahametals.com

as I have seen various Bitcoin ("BTC") articles linked by Justine Hermosa (a member of a Facebook Bitcoin Group).  Ms. Hermosa is closely following AHA's coverage of BTC and posting new articles from their website.  Why would AHA (purportedly following gold and hard assets...) be devoting part of their website (as well as two articles in this issue of their magazine)?  It looks like a combination of the below two concepts:

1)  AHA apparently feels that there is at least some merit in BTC

2)  AHA perhaps has gotten feedback from readers who want BTC articles...

At AHA's website, there are SIX current articles (3 days or less since published) on BTC.  I should ask them if they would take BTC for a subscription, smile,,,

Here is an interesting article that they post from the UK (in which they look at some fundamentals of 20  stockmarkets):

http://www.ahametals.com/20-top-contenders-world-cup-investing/

Nor has their website forgotten about gold:

http://www.ahametals.com/shanghai-start-international-gold-trading-4q/

There are six other gold-related articles linked at the above as well.

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In AHA's "World News Updates" section, I noted an interesting table originally from Knight Frank Wealth Report (of London).  The below shows their view of the preferences of the very rich on cities where they will choose to live:

Rank	2013	2014	2024
1	London	London	New York
2	New York	New York	London
3	Singapore	Singapore	Hong Kong
4	Hong Kong	Hong Kong	Singapore
5	Geneva	Geneva	Shanghai
6	Shanghai	Shanghai	Beijing
7	Dubai	Miami	Dubai
8	Miami	Dubai	Miami
9	Paris	Beijing	Geneva
10	Beijing	Paris	Mumbai

Note Beijing (in red) moving up, despite pollution, and their prediction that Mumbai (India) will move into position 10.

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Also in "World News Updates" is their short piece on BTC (as a bad investment this year, but recall that AHA's BTC info is always late), a nice article on the richest billionaire in each of some 49 countries (um, where are the Rothschilds?), as well as The New York Times own Paul Krugman calling Bitcoin "evil" (?, that's, "The Old Gray Lady" has jumped the shark...).  Granted, Krugman's article popped up just when BTC exchange Mt Gox crashed & burned...

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Author Amber Ness is a regular there at AHA.  She pens a piece "Birth of the Modern Gold Bug" in which she looks at modern history of physical gold buyers, notably gold purchases picking up since The Great Recession.  Also interesting is her observation that gold owners are NOT just TEA Party members, that even more Democrats are buying gold...

She goes on to cover familiar (to us!) ground: why investors should consider having 5% - 20% of their wealth in gold.

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Jason Walter Vaile writes a nice article outlining the history of the American Gold Eagle coin.  He starts with a quick overview of gold coins (Lydia was first, 550 BC), and then goes on to describe the design and production of the Gold Eagle.  The obverse ("heads") side is inspired by the design of Augustus Saint-Gaudens and the reverse side designed and sculpted by Miley-Tucker Frost.

Vaile has a handy chart (data from Zero Hedge!) showing sales of Gold Eagles since January 2009.

All gold in the Eagles is mined from the USA.

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Richard Alexander Rogers writes "Good Delivery: Good for You".  "Good Delivery" bars are required for many LARGE buyers of gold bullion, in the USA Comex has their standards, outside of the USA the standard is LBMA standards for gold delivery.

LBMA (London Bullion Market Association) standards include gold bars of at least .995 fine, bar weight between 350 and 430 oz (troy) with fineness and refiner's stampings.  Both Comex and LBMA insist on a "Chain of Integrity" (gold stored at recognized warehouses), else, the bars have to be assayed...

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Amber Ness writes "Closet Preppers: Quietly Arming for Doomsday"!  Apparently prepping is catching on all over the USA.

Her article is very good, quite comprehensive!  She covers most of the bases:

-- cash, both at a bank and/or at home (eight months worth)
-- gold & silver coins (including "junk silver" - pre-1965 US dimes & quarters)
-- a plan as to what family members are to do...
-- food (short-term and long), gardening
-- guns & ammo (yep, she says get them)
-- tools and similar supplies (a very long list)

But, she writes that doing SOME of the above is better than doing nothing!

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Gabe Benson wonders in his article whether we can make money in Classic Cars (not just old ones).

Ah, not for me...

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While we all read that manufacturing is nearly dead in the USA, Jason Walter Vaile advises in his article "American Artisans" that there are a wide variety of Americans producing high quality products (vodka, knives, guitars, woodworking, marbles and hats).

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"222 Year History of the U.S. Mint" (by Douglas Kale) is a nicely done history of our Mint, from before we even HAD one (Alexander Hamilton proposed it in 1791, official coin production started in 1793).

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AHA has recently featured pieces from authors from JustLuxe (justluxe.com, as website of luxury products and services for the wealthy, very weaalthy).  And this month, AHA features five articles from JustLuxe.

JustLuxe author Courtney Driver contributes a piece on polo, about an elitist sport as I can imagine.  She discusses the sport with Nic Roldan, an important American player.  Polo requires a variety of abilities, riding a horse in stressful conditions is but one...

JustLuxe author Noah Joseph writes a piece on the current fastest car, the Hennessey Venom GT (a highly modified Lotus Exige, this is now the world record-holder at 270 MPH...

Susan Kime (who has contributed to AHA before) writes a nice piece about World View Experiences, a company hoping to offer balloon & glider trips to take tourists to the edge of space (over 100,000 feet) by 2016...  At that height, you can experience the "Overview Effect" where you see the curvature of the Earth as well as the light coming up from the sun before sunrise there at the edge of space...  I hope they are able to make that happen!  Cost: $75,000 per trip.

Jared Paul Stern writes about a new lavish new "coffee table book" about American yacht maker Hinckley Yachts.  Billionaire David Rockefeller takes his Hinckley out for cruises from Southwest Harbor, Maine.  Martha Stewart owns one too!

Mila Pantovich (the fifth author featured in AHA's current issue) writes about costume design (movie costumes).  She focuses on costume designer Judianna Makovsky, who did much of the costume work for the new "Captain America" movie and has dome other work including for "The Hunger Games" and "Harry Potter".

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Watch expert Ed Estlow follows up on his earlier article with more information on the re-emerging American watch makers.  "American -- No Really -- American Watches" looks at Shinola Watch Company ("Built in Detroit") and goes on to look at other American watches (none look inexpensive nor traditional) such as Devon, Keaton Myrick and RGM (Roland Murphy).

OK, I am happy to see more "American Artisans" making quality products that appear to succeed in this highly competitive world we share, but NONE of these are "vertically intergrated" yet, they import at least some important parts (from Switzerland and perhaps other places).

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Michael Haynes (CEO of respected precious metals dealer APMEX) writes "American Eagle First Strike: Gold and Silver with Zing", about coins that are minted while the dies (that stamp the metal coin planchettes into their Eagle designs) are brand new, and (whose coins) are submitted by collectors and dealers to the grading companies PCGS or NGC.  These grading companies then "slab" the nicest pieces into the plastic, (hopefully) tamper-proof holders with a grade ("MS-70" is the highest possible grade: NO blemishes on the coin).

There DOES appear to be demand for these extremely high quality bullion pieces.  The MS-70 population of Eagles (silver and gold) commands prices well above "spot Eagle" prices (regular Gold Eagles typically already cost some 5% or more than spot price of gold).  In the case of the 2011 Gold Eagle, a "First Strike, MS-70" Eagle commanded a price of around $2400 (April, 2014) or around an $1100 / oz premium vs. gold spot price.

I did not know that these "numismatic quality" God and Silver Eagles went for so much more!

[Ed. Note: Beware of fakes!  China is making fake "slabbed" pieces...]

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John Maben writes "Top Ten Tips for Buying Precious Metals".

Many of you, dear readers, already KNOW how to buy silver and gold.  But, Maben's article is of value to any new people considering buying precious metals.

[Ed. Note: Maben is really writing: "Do your homework."]

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AHA publishes several shorter pieces each issue on developments in the mining industry.  This issue's "Mining News" has an article on Transition Metals finding a likely good discovery of platinum at SUnday Lake (Ontario).

Another item in "Mining News" finds that Taseko Mining got rejected (second time) by the Canadian Minister of the Environment for a new gold-copper mine (Taseko will change their mining plan and try a third time).

"Streaming companies" are those who buy-in (one way or another) into receiving a percentage of a mine's or a refiner's output.  "Streaming Companies Break Records in 2013" explores three players in this space, the most well-known being Silver Wheaton (ticker: SLW -- whose stock has zoomed about 25% in the last month, see: http://stockcharts.com/h-sc/ui?s=slw).  But, many miners, including streaming miners, are losing money...

Other "Mining News items include pieces on Rio Tinto (ticker: RIO) cutting costs as well as Centerra Gold maintaining its Kumtor gold mine (the second highest -- altitude -- gold mine in the world, after Peru's Yanacocha) in risky Kyrgystan.

Finally the last mining item this issue is a very interesting report (a survey of 690 mining executives) from the Fraser Institute on friendly mining jurisdictions worldwide.  Sweden comes in at Number One!  That would not have been my guess.  Other highly rated (mining friendly) jurisdictions include Finland, Alberta (Canada) and Wyoming (in at Number Five worldwide), also considering mining friendly wre US states Nevada and Colorado.  LEAST friendly jurisdictions include Kyrgyzstan (um, Centerra?), Venezuela (duh), Argentina (no surprise either), Philippines, Zimbabwe, Ivory Coast Indonesia and Madagascar.

[Ed. Comment:  Buy the metals, not the miners, but that's just me...]

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John W. Garibald writes the Editorial at the end of each AHA issue.  "The Impact of Geopolitical Events on Gold" is a fine piece explaining why sometimes not much seems to happen even when alarming news arrives (he looks at Russia and Ukraine here).

He asks why the prices of precious metals are not rising higher on what appear to me (and others) to be ever-more bad news in the world today.  Garibald writes this gem of a sentence which sums this conundrum up rather well:

"As with most things in the financial markets, the answer is multi-faceted and nuanced, but there are at least some primary contributors to study."

These contributors include size of the physical and "paper" PM markets, Federal Reserve QE policy, real interest rates and inflation in general (including in different places).  He suggests that you NOT play the headlines when buying (or selling PMs), but instead to average-in your costs through time and think long-term.

Bravo, Mr. Garibald!

Review Of Panorama Cajamarquino

This is the second article covering our trip to Cajamarca, and for me, the highlight of an excellent trip.

The Department (roughly equals a US state) of Cajamarca has but one big city one real newspaper (circulation: 10,000 copies, published daily, roughly 32 pages or so); Panorama Cajamarquino (The Cajamarca Panorama).  For a few reasons, I thought I would like to have an interview with someone at their paper.  Our hotel kindly called them up, and I soon got an email from Mr. Jaime Abanta Padilla, their editor, inviting me over Thursday morning.  I brought along my camera, as any budding reporter would (remember my interview in Italy with the big gold buyer...), the walk was just 6 blocks or so from my hotel.  Here is the entrance to their building:

Rather than fob me off with some junior reporter, Mr. Abante was kind enough to give me over two hours of his time.  Here is a picture of him next to a publicity sign of theirs:

Also on the first floor was an old printing press they keep "just in case" I would guess.  He told me it was about 40 years old, and that given a fair of maintenance and some spare parts that it would still work.  Keeping machinery around "just in case" is perfectly valid in Peru and many other countries.

Here is one the two more modern presses that they use, the other has about the same capacity, they use both each day.  They print each edition in the afternoon, and distribute it so readers can buy them early in the morning.  The printing press is from Germany, but I do not know which company.  He told me that they have locals who can do some maintenance, more complicated work is done by bringing in experts from Trujillo (a few hours away, and Peru´s second largest city).  He told me that a machine like this (used) would run some $20,000.

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We then went upstairs to talk.  After the pleasantries ("How do you like Cajamarca?", "How many children do you have?", etc.) we got down to business.  He told me that Cajamarca was not only the capital of the Department, but also a "regional capital" that served border areas of other Departments, their newspaper circulated throughout various parts interior parts of northern Peru.

The city has some 250,000 inhabitants, that has grown a LOT since about 1990 (50,000), most of the growth is due to the mining industry, Peru´s largest economic sector.  The mining is done well away from the city.  There has been a COST to all of this revenue and people moving there: a higher crime rate, but tourists are not molested.

The city itself and the surrounding area possess remarkable beauty (see my last article), and this brings in a lot of tourists too.  He estimated that tourism brings in 10% - 15% of the money to Cajamarca.  Tourism is DOWN somewhat due to social strife (see comments later below), but it is slowly coming back.  Our hotel, for example, was not at all empty nor their restaurant...

We briefly covered a little bit of the city´s history, most of which is in my last article.  But one important fact I did not know until he told me: the Spanish first found gold and silver in 1772 (while Peru was still a colony), and gold mining has been continuosly mined ever since, and has always been a very important part of their economy.

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Because of my personal interest in gold (shared by many of you, dear readers), I asked  lot of questions about that whole industry there.  Almost all of this information came from him, Mr. Abante knows his turf...  The biggest mine in the Department is the famous Yanacocha gold mine, it is the largest gold mine in South America.  Yanacocha is a joint-venture project of Canada´s Newmont and Peru´s Buenaventura (by far Peru´s largest mining company).  There is another large gold mine run by Canada´s Goldfields, but is not as big as Yanacocha.

But, the BIG news in the gold mining business in Cajamarca is the HUGE new discovery named "Conga".  Conga´s gold lies underground, and unfortunately also lies under between 3 and 6 (depends on who is counting and how -- Mr. Abante said four) Andean lakes.  Conga is such a large deposit that if developed it would be one of the very largest in the WORLD.  The problem is that those lakes would be destroyed in the mining process, and there are many locals who depend on those lakes for water...  And they have always lived there...  When (not if, the deposit is so big that at some point it will get mined) they start serious work up there, the population would probably have to be moved...  And, as far as I know, there is really no convenient vacant land for them to move to...

[Sidebar on mining in Peru in general.  The laws are different there than in the USA.  The national government owns ALL underground mineral resources.  While private land owners (say an ecological minded rancher -- common in ecology-concious Cajamarca) can say "No" to miners coming on to his land, there are a variety of tricks and coercions the government and others can do to "convince" them, in the end, they all sign..., for peanuts.  It is also important to understand that mining is still a dirty business, especially in Peru where the national government is fairly lax in enforcing "best practices" (as miners do in the USA).  Yanacocha, for example, even while it is relatively "green" and responsable, did have an accident when a trucker wrecked his truck filled with poisonous mercury that spilled into a river with over 1000 affected to some degree...]

So, mining is a LITTLE BIT cleaner now than in the past, Mr. Abante told me, but not very much.  There is still corruption and all...  And the government needs the money (Cajamarca Department gets to keep about 30% of the money from mining)...  So keeping in mind that mining is still dirty and pollutes a lot there in Peru, it is understandable that a LOT of locals are against Conga...  Many (most?) are in favor of the project, however, as it would bring in a lot of money.  $ Billions and $ billions...  But, the lakes disappear, the really big problem is WATER.  And reservoirs (dams, a proposed solution) bring their own problems and are not as good as lakes...

At this point the project has not been started, and there is a rough stand-off between rural locals (and their environmental allies) who would be affected and almost everyone else (who would make more money).  The gold miners at Yanacocha, for example, are very well paid and treated well.  And mines bring in all sorts of service-sector work (alas including crime like prostitution, etc.).  Another problem is that radicals have infiltrated the local protest movements (hey, do you think all those really bad "Sendero Luminoso" guys just disappeared into the night?).

So the project has not been started. It is not clear when things will get moving, and a few of the protests wre violent enough (recall: Sendero Luminoso) that the government imposed a state of emergency three times due to rioting, and THAT is what hurt tourism as well.

Just based on what I "know" now, "Presidente Mix" would pay each affected citizen, say, $5000, and put each onto a decent patch of land as nearby as feasible.  This will not happen though, because in general the rural poor are treated badly by TPTB (The Powers That Be)...

One other important mining project, apparently LESS controversial is the "HUGE-ISSIMO" (sorry, lo siento mucho...) copper deposit at Michiquillay (Quechua is a wonderful language by the way, I honestly mean that, it is so much more connected to the natural world than any other language I have looked into...).  Michiquillay is so big that once in production, Peru would overcome Chile as the world´s largest producer of copper.  Peru is now No. 2 in copper production (I think), Peru and Mexico are both essentially tied for No. 1 in silver, and Peru is about No. 5 in gold production.

The above commentary would lead one to think that Peru has very large mineral resources.  Yes.  The words Mr. Abante used were: "reservas INMENSAS".  But, Chile has large reserves in their uninhabited deserts, almost all of Peru´s mineral resources are co-located with people...

Two last things about natural resources.  I asked him about China, who is BIG in mining in Africa.  He said yes, the Chinese are exploring there in Peru.  And he expects LOTS of Chinese to be coming down to Peru, as tourists and owners (for better and worse...).  I also asked him for an update on the oil and gas sector, which is "fairly important" in Peru.  They HAVE indeed started exploiting their Camisea gas reserves) as explained in an earlier blog article: ) and they export some crude oil.  He told me that the geology seemed favorable for finding more oil in their Amazonian Basin, but that Peru would never become "a Saudi Arabia", that even if they find big deposits (who knows?) that it would not be a game-changer...

We then went on to talk about other important parts of the regional economy: agriculture (and related), handicrafts and other artisanal work and new fish-farms (which are apparently working out well, the fish are not diseased or toxic and the money is there -- they raise trout in their fish-farms the way we do, in pools).  Also, there are several infrastructure projects (especially roads and bridges, as well as some electric projects).

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So, there it is.  I now know more about Cajamarca than any other American I know, LOL!  But, it was due to Mr. Abante being kind enough to give me HIS time and knowledge of his wonderful region.  Below is a picture of the front page of Thursday´s edition (the day I met with him):

The edition on Wednesday headlined the death of Hugo Chavez (BIG NEWS in Latin America), even more so than above.  Disclosure: neither Mr. Abante nor I shed a tear nor had moment of silence.

Jaime Abante!  Muchas gracias de mi corazon y de mi alma!  He is a gentleman and a scholar.

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Jaime Abanto Padilla has a blog, he writes there daily (in Spanish), check it out if you are curious, I am adding his to my list of blogs to read!

balconinterior.blogspot.com